The response of stock market volatility to futures-based measures of monetary policy shocks
نویسندگان
چکیده
Article history: Received 11 October 2012 Received in revised form 3 November 2014 Accepted 3 November 2014 Available online 11 November 2014 In this paper, we investigate the dynamic response of stock market volatility to changes in monetary policy. Using a vector autoregressive model, our findings reveal a significant response of stock returns and volatility to monetary policy shocks. While the increase in the volatility risk premium, futures-trading volume and leverage appear to contribute to a short-term increase in volatility, the longer-term dynamics of volatility are dominated by monetary policy’s effect on fundamentals. The estimation results from a bivariate VAR-GARCH model suggest that the Fed does not respond to the stockmarket at a high frequency but thatmarket participants’ uncertainty regarding the monetary stance affects stock market volatility. © 2014 Elsevier Inc. All rights reserved. JEL classification: C32 C58 E52 E58 G10 G12
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تاریخ انتشار 2015